Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to TRACE Reporting and Dissemination of Transactions in Additional Asset-Backed Securities, 70602-70607 [2013-28273]
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Federal Register / Vol. 78, No. 228 / Tuesday, November 26, 2013 / Notices
emcdonald on DSK67QTVN1PROD with NOTICES
supporting financial documentation
under seal. Id.
The Agreement is the successor
agreement to one previously found to be
functionally equivalent to the Inbound
Market-Dominant Multi-Service
Agreements with Foreign Postal
Operators I (MC2010–35).2 Notice at 1.
The Postal Service identifies Australia
Post, the postal operator for Australia,
and the Postal Service as the parties to
the Agreement. Id. at 3.
The Postal Service states that the
Agreement includes negotiated pricing
for various inbound letter-post products,
including small packets with delivery
confirmation and registered mail. Id. It
asserts that the Agreement will not only
improve financial performance over
default Universal Postal Union (UPU)
rates, but will also improve operational
performance and other factors. Id. The
Postal Service indicates that it has
incorporated the framework for a new
product into the Agreement; however
the parties are not yet prepared to
introduce the new product.3 Id.
The Postal Service identifies January
1, 2014 as the intended effective date;
states that its Notice provides the
requisite advance notice; identifies a
Postal Service official as a contact
person; provides financial data and
information in the redacted workpapers;
describes expected operational
improvements; and addresses why the
Agreement will not result in
unreasonable harm to the marketplace.
Id. at 2–6. The intended duration is two
years from the effective date, subject to
earlier termination or extension by
amendment. Id. Attachment 2 at 7.
Data collection and performance
reporting proposals. The Postal Service
proposes that no special data collection
plan be created for the Agreement
because it intends to report information
on the Agreement through the Annual
Compliance Report. Id. at 6. With
respect to performance measurement,
the Postal Service asks that it be
excepted from separate reporting under
39 CFR 3055.3(a)(3) based on a previous
Commission order.4 Notice at 6.
Statutory criteria. The Postal Service
states that under 39 U.S.C. 3622(c)(10),
the criteria for Commission review are
whether the Agreement (1) Improves the
Postal Service’s net financial position or
2 See Docket No. R2012–2, Order Concerning an
Additional Inbound Market Dominant MultiService Agreement with Foreign Postal Operators 1
Negotiated Service Agreement, November 23, 2011
(Order No. 996).
3 The Postal Service states that it will prepare and
file any necessary classification and rate filings
with the Commission when the new product is
ready to be introduced. Id. at n.2.
4 See Order No. 996 at 7.
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enhances performance of operational
functions; (2) will not cause
unreasonable harm to the marketplace;
and (3) will be available on public and
reasonable terms to similarly situated
mailers. Id. at 7. It states that it
addresses the first two criteria in its
Notice and views the third criterion as
inapplicable, given Australia Post’s
status as the designated operator for
Letter Post originating in Australia. Id.
Functional equivalence. The Postal
Service notes that in Order No. 1864,
the Commission requested that it put
forth a proposal for identification of the
appropriate baseline for comparison of
agreements for functional equivalency
purposes.5 Notice at 7–8. The Postal
Service states that the Agreement is
functionally equivalent to previously
included agreements because ‘‘it is in all
material respects the same as the
predecessor agreement between these
two parties . . . ,’’ which was found by
the Commission to be appropriately
classified in this product grouping. Id.
at 8. It also states that the terms of the
Agreement fit within the proposed Mail
Classification Schedule (MCS) language
for Inbound Market-Dominant MultiService Agreements with Foreign Postal
Operators 1 and will conform to a
common description. Id. The Postal
Service asserts that in comparison with
its predecessor, cost characteristics and
the financial models used to project
costs and revenues are the same and,
except for minor changes, the
Agreement and its predecessor are
nearly identical. Id.
The Postal Service identifies two
differences between the Agreement and
its predecessor. Annex 7 of the
Agreement incorporates an amendment
made to the predecessor agreement. Id.
at 8–9. Annex 8 concerning the
potential new product is included in the
Agreement, but is not yet operative. Id.
at 9. It was included to facilitate
implementation when the parties are
prepared to introduce the service,
without need for formal amendment of
the Agreement. Id. Other minor
differences are also included. Id. at 9–
10. The Postal Service states that none
of these differences detracts from the
conclusion that the Agreement is
functionally equivalent to its
predecessor agreement. Id. at 10.
III. Commission Action
The Commission, in conformance
with rule 3010.44, establishes Docket
No. R2014–2 to consider matters raised
by the Notice. The Commission invites
interested persons to submit comments
on whether the Notice is consistent with
the policies of 39 U.S.C. 3622 and 39
CFR 3010.40. Comments are due no
later than December 2, 2013.6
The public portions of the Postal
Service’s filings have been posted on the
Commission’s Web site. They can be
accessed at https://www.prc.gov.
Information on how to obtain access to
non-public material is available at 39
CFR part 3007.
The Commission appoints Natalie R.
Ward to serve as Public Representative
in this proceeding.
IV. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket
No. R2014–2 to consider matters raised
by the Notice of United States Postal
Service of Type 2 Rate Adjustment, and
Notice of Filing Functionally Equivalent
Agreement, filed November 15, 2013.
2. Pursuant to 39 U.S.C. 505, Natalie
R. Ward is appointed to serve as an
officer of the Commission (Public
Representative) to represent the
interests of the general public in this
proceeding.
3. Comments by interested persons
are due no later than December 2, 2013.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Ruth Ann Abrams,
Acting Secretary.
[FR Doc. 2013–28260 Filed 11–25–13; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70906; File No. SR–FINRA–
2013–046]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of a
Proposed Rule Change Relating to
TRACE Reporting and Dissemination
of Transactions in Additional AssetBacked Securities
November 20, 2013.
5 Docket
No. R2013–9, Order No. 1864, Order
Approving an Additional Inbound Market
Dominant Multi-Service Agreement with Foreign
Postal Operators 1 Negotiated Service Agreement
(with Korea Post), October 30, 2013. In response,
the Postal Service filed a motion for partial
reconsideration. See Docket No. R2013–9, Motion of
Partial Reconsideration of Order No. 1864,
November 6, 2013.
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Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
6 Due to the Notice’s filing date and considering
the Agreement’s effective date, the Commission
finds it appropriate to extend the comment period
prescribed in 39 CFR 3010.44(a)(5) to December 2,
2013.
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Federal Register / Vol. 78, No. 228 / Tuesday, November 26, 2013 / Notices
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
13, 2013, the Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by FINRA. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend the
FINRA Rule 6700 Series and the Trade
Reporting and Compliance Engine
(‘‘TRACE’’) dissemination protocols to
disseminate additional Asset-Backed
Securities transactions and,
concomitantly, to reduce the reporting
periods for such securities. FINRA also
proposes to re-name as ‘‘Securitized
Products’’ the broad group of securities
currently defined as ‘‘Asset-Backed
Securities,’’ to re-define the term
‘‘Asset-Backed Security’’ more narrowly
to mean the specific securities that
FINRA proposes to disseminate in the
proposed rule change, to make other
definitional changes and to incorporate
technical and conforming amendments
to the FINRA Rule 6700 Series and
FINRA Rule 7730 in connection with
provisions that have expired and the
amendments referenced above.
The text of the proposed rule change
is available on FINRA’s Web site at
https://www.finra.org, at the principal
office of FINRA and at the
Commission’s Public Reference Room.3
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 As part of the proposed rule change, FINRA
submitted an Exhibit 4 and an Exhibit 5. The
Exhibit 4 shows the text of the proposed rule
change marked to show the proposed changes as
compared to the FINRA Rule 6700 Series and
FINRA Rule 7730 including amendments approved
by the SEC as if such amendments were effective.
See note 6. The Exhibit 5 shows the text of the
proposed rule change marked to show the proposed
changes as compared to the current rule text of the
rules in accordance with the requirements of Form
19b–4.
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2 17
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summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
FINRA proposes to amend the FINRA
Rule 6700 Series and the TRACE
dissemination protocols to provide for
the dissemination of transactions in an
additional group of Asset-Backed
Securities. Transactions in such AssetBacked Securities effected pursuant to
Rule 144A 4 under the Securities Act of
1933 5 (‘‘Rule 144A transactions’’) will
also be disseminated.6 Concomitantly,
FINRA proposes to reduce the reporting
period for such Asset-Backed Securities
and incorporate two changes to the
TRACE dissemination protocols. FINRA
also proposes to re-name as Securitized
Products the broad group of securities
currently defined as Asset-Backed
Securities in FINRA Rule 6710(m) and,
in a proposed new definition in FINRA
Rule 6710(cc), to re-define the term
Asset-Backed Security more narrowly to
mean the specific securities that FINRA
proposes to disseminate in the proposed
rule change (e.g., asset-backed securities
collateralized by pools of credit card
receivables, student loans, auto loans,
etc.).7 Also, in FINRA Rule 6710, FINRA
proposes to add three new definitions
4 17
5 15
CFR 230.144A.
U.S.C. 77a et seq. (hereinafter ‘‘Securities
Act’’).
6 The SEC recently approved FINRA’s proposed
rule change to disseminate transactions in TRACEEligible Securities effected as Rule 144A
transactions (provided that securities of the same
type are subject to dissemination if effected in nonRule 144A transactions). See Securities Exchange
Act Release No. 70345 (September 6, 2013), 78 FR
56251 (September 12, 2013) (Order Granting
Approval of Proposed Rule Change Relating to the
Dissemination of Transactions in TRACE-Eligible
Securities that are Effected Pursuant to Securities
Act Rule 144A); Securities Exchange Act Release
No. 70691 (October 16, 2013), 78 FR 62788 (October
22, 2013) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change Relating to
TRACE Fees for Securities Act Rule 144A
Transaction Data) (together, ‘‘Rule 144A
Dissemination Amendments’’); and Regulatory
Notice 13–35 (announcing June 30, 2014 as the
effective date for SR–FINRA–2013–029 and SR–
FINRA–2013–043). As a result, when the proposed
rule change to disseminate the designated group of
Asset-Backed Securities is approved and becomes
effective, both Rule 144A and non-Rule 144A
transactions in such Asset-Backed Securities will be
disseminated.
7 Except when the context requires otherwise,
hereinafter, FINRA uses the terms Securitized
Product and Asset-Backed Security as if adopted
(i.e., Asset-Backed Security means a narrow class of
Securitized Product as defined in proposed FINRA
Rule 6710(cc) and Securitized Product means the
broader group of products and instruments,
including Asset-Backed Securities).
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70603
and amend the defined terms ‘‘List or
Fixed Offering Price Transaction’’ and
‘‘Takedown Transaction’’ to apply to
certain primary market transactions in
Asset-Backed Securities.8 Finally, in the
FINRA Rule 6700 Series and FINRA
Rule 7730, FINRA proposes to delete
reporting provisions that have expired
and incorporate additional technical
and conforming amendments consistent
with the above-referenced proposed
amendments to the FINRA Rule 6700
Series.
Definitions
Asset-Backed Security—Proposed
FINRA Rule 6710(cc)
FINRA proposes to re-define AssetBacked Security more narrowly to
describe a specific class of Securitized
Products that is the subject of the
proposed rule change. FINRA believes
that the proposed narrower definition of
Asset-Backed Security is consistent with
industry usage. In addition, to clarify
the scope of the term, FINRA proposes
to specifically exclude three types of
instruments from the term Asset-Backed
Security: (i) Agency Pass-Through
Mortgage-Backed Securities traded to be
announced (‘‘TBA’’) 9 or in Specified
Pool Transactions; 10 (ii) SBA-Backed
ABS 11 traded TBA or in Specified Pool
Transactions; and (iii) Collateralized
Mortgage Obligations (‘‘CMOs’’).12 As
re-defined in proposed FINRA Rule
6710(cc), the term ‘‘Asset-Backed
Security’’ means:
A type of Securitized Product where the
Asset-Backed Security is collateralized by
any type of financial asset, such as a
consumer or student loan, a lease, or a
secured or unsecured receivable, but
excludes: (i) An Agency Pass-Through
Mortgage-Backed Security as defined in
paragraph (v) traded To Be Announced
(‘‘TBA’’) as defined in paragraph (u) or in a
Specified Pool Transaction as defined in
paragraph (x); (ii) an SBA-Backed ABS as
defined in paragraph (bb) traded TBA or in
a Specified Pool Transaction; and (iii) a
Collateralized Mortgage Obligation as defined
in paragraph (dd).
In addition, in proposed
Supplementary Material .01 to FINRA
Rule 6710, FINRA provides additional
8 The terms List or Fixed Offering Price and
Takedown Transaction are defined in, respectively,
FINRA Rule 6710(q) and FINRA Rule 6710(r).
9 The terms Agency Pass-Through MortgageBacked Security and To Be Announced (‘‘TBA’’) are
defined, respectively, in FINRA Rule 6710(v) and
FINRA Rule 6710(u).
10 The term Specified Pool Transaction is defined
in FINRA Rule 6710(x).
11 The term SBA-Backed ABS is defined in FINRA
Rule 6710(bb).
12 FINRA proposes to define the term
Collateralized Mortgage Obligation in proposed
FINRA Rule 6710(dd). See note 17.
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guidance regarding the scope of the
defined term Asset-Backed Security.13
Securitized Product—Amended FINRA
Rule 6710(m)
FINRA proposes to amend FINRA
Rule 6710(m) to re-name as Securitized
Products the broader group of securities
currently defined as Asset-Backed
Securities. The term Securitized Product
is used widely to describe the broad
group of securities, including various
types of mortgage-backed securities that
FINRA currently refers to in FINRA
Rule 6710(m). FINRA’s proposal to
adopt the term Securitized Product to
apply to this wide range of structured
and securitized instruments is
consistent with industry usage.
Proposed amended FINRA Rule
6710(m) also includes a technical
amendment to change a reference to
Section 3(a)(77)(A) of the Act 14 to
Section 3(a)(79)(A) of the Act.15 Section
3(a)(77) of the Act was renumbered in
Section 101(b)(1) of the Jumpstart Our
Business Startups Act (the ‘‘JOBS
Act’’).16 Proposed amended FINRA Rule
6710(m) provides:
‘‘Securitized Product’’ means a security
collateralized by any type of financial asset,
such as a loan, a lease, a mortgage, or a
secured or unsecured receivable, and
includes but is not limited to an asset-backed
security as defined in Section 3(a)(79)(A) of
the Exchange Act, a synthetic asset-backed
security, and any residual tranche or interest
of any security specified above, which
tranche or interest is a debt security for
purposes of paragraph (a) and the Rule 6700
Series.
emcdonald on DSK67QTVN1PROD with NOTICES
Other Definitions
FINRA proposes to define
Collateralized Mortgage Obligation,
Agency-Backed Commercial MortgageBacked Security and Non-Agency13 Proposed Supplementary Material .01 to
FINRA Rule 6710 provides that Asset-Backed
Security shall include, but is not limited to:
Securities collateralized by the following types of
assets and securities: Credit card receivables;
automobile loans and leases; student loans; home
equity loans and home equity lines of credit;
aircraft leases; automobile floorplan and wholesale
loans; motorcycle loans and leases; recreational
vehicle loans; manufactured housing loans;
commercial loans; tranches of other Asset-Backed
Securities; reinsurance; timeshare obligations; loans
or other financial instruments generating a stream
of payments and guaranteed as to principal or
interest (or both) by the Small Business
Administration (traded other than to be announced
(‘‘TBA’’) as defined in paragraph (u) or in a
Specified Pool Transaction as defined in paragraph
(x)); collateralized debt obligations; collateralized
bond obligations; collateralized loan obligations;
and Non-Agency Backed Commercial MortgageBacked Securities as defined in paragraph (ff).
14 15 U.S.C. 78c(a)(77)(A).
15 15 U.S.C. 78c(a)(79)(A).
16 15 U.S.C. 78c(a)(77). The JOBS Act was enacted
on April 5, 2012; Public Law 112–106, 126 Stat. 306
(2012).
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Backed Commercial Mortgage-Backed
Security in, respectively, proposed
FINRA Rule 6710(dd), proposed FINRA
Rule 6710(ee) and proposed FINRA Rule
6710(ff) to provide additional clarity
regarding various classes of securities
that are included in, or excluded from,
the terms Securitized Product and
Asset-Backed Security and the various
dissemination and reporting
requirements applicable to these
different types of Securitized
Products.17
Dissemination
Currently, FINRA requires that
virtually all transactions in U.S. dollardenominated debt securities, except
U.S. Treasury securities, foreign
sovereign securities and municipal
securities, be reported to TRACE, and
most transactions reported are subject to
dissemination immediately upon receipt
of a transaction report.
Securitized Products were the last
major group of securities to be added to
TRACE. After studying the liquidity and
trading characteristics of various classes
of Securitized Products, FINRA began to
disseminate Securitized Products in
phases, beginning with the
dissemination of two very significant
segments: TBA transactions and
Specified Pool transactions in Agency
17 In proposed FINRA Rule 6710(dd),
Collateralized Mortgage Obligation is defined as:
A type of Securitized Product structured in
multiple classes (or tranches) backed by Agency
Pass-Through Mortgage-Backed Securities as
defined in paragraph (v), mortgage loans,
certificates backed by project loans or construction
loans, other types of mortgage-backed securities or
assets derivative of mortgage-backed securities, and
includes a real estate mortgage investment conduit
(‘‘REMIC’’) and an Agency-Backed Commercial
Mortgage-Backed Security as defined in paragraph
(ee).
In proposed FINRA Rule 6710(ee), AgencyBacked Commercial Mortgage-Backed Security is
defined as:
A type of Securitized Product that is classified as
a Collateralized Mortgage Obligation for purposes of
the Rule 6700 Series and Rule 7730 and is issued
in conformity with a program of an Agency as
defined in paragraph (k) or a GovernmentSponsored Enterprise (‘‘GSE’’) as defined in
paragraph (n), for which the timely payment of
principal and interest is guaranteed by the Agency
or GSE, representing ownership interest in a pool
(or pools) of mortgage loans on commercial
property.
In proposed FINRA Rule 6710(ff), Non-AgencyBackedCommercial Mortgage-Backed Security is
defined as:
A type of Securitized Product that is classified as
an Asset-Backed Security for purposes of the Rule
6700 Series and Rule 7730 and is issued by an
entity other than an Agency as defined in paragraph
(k) or a Government-Sponsored Enterprise (‘‘GSE’’)
as defined in paragraph (n), representing ownership
interest in a pool (or pools) of mortgage loans on
commercial property.
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Pass-Through Mortgage-Backed
Securities and SBA-Backed ABS.18
FINRA proposes that transactions in
Asset-Backed Securities be
disseminated, including Rule 144A
transactions in such securities, to
increase transparency in the bond
market, and particularly in the market
for Asset-Backed Securities.19 FINRA
has reviewed substantial amounts of
transaction data for Asset-Backed
Securities since reporting began on May
16, 2011. The Asset-Backed Securities
market is considered a largely
institutional market.20 In 2012, the
average daily par value traded in AssetBacked Securities was $5.8 billion,
which was approximately the same size
of the market in publicly traded NonInvestment Grade corporate bonds.21
Consistent with the institutional nature
of Asset-Backed Securities transactions,
although the size of the Asset-Backed
Securities market is comparable to the
market for publicly-traded NonInvestment Grade corporate bonds, there
are substantially fewer trades in AssetBacked Securities.
Based on the characteristics of the
market, FINRA believes that the
proposed additional price transparency
in the Asset-Backed Securities market
will enhance the ability of investors to
identify and negotiate fair and
18 On November 12, 2012, FINRA began
disseminating transactions in Agency Pass-Though
Mortgage-Backed Securities traded TBA (‘‘MBS
TBA transactions’’), which are the most liquid
Securitized Products. See Securities Exchange Act
Release No. 66829 (April 18, 2012), 77 FR 24748
(April 25, 2012) (SEC Approval Order, File No. SR–
FINRA–2012–020). See also Regulatory Notice 12–
26 (May 2012) and Regulatory Notice 12–48
(November 2012).
On July 22, 2013, FINRA began disseminating
Agency Pass-Through Mortgage-Backed Securities
and SBA-Backed ABS traded in Specified Pool
Transactions, which are correlated in pricing to
MBS TBA transactions and TBA transactions in
SBA-Backed ABS. See Securities Exchange Act
Release No. 68084 (October 23, 2012), 77 FR 65436
(October 26, 2012) (SEC Approval Order of File No.
SR–FINRA–2012–042) and Regulatory Notice 12–56
(December 2012).
19 See supra note 6, Rule 144A Dissemination
Amendments.
The proposed rule change to disseminate AssetBacked Securities would be the third group of
Securitized Products to be disseminated. FINRA
continues to review the fourth subclass of
Securitized Products—CMOs and Agency-Backed
Commercial Mortgage-Backed Securities—and, at a
later date, may propose that transactions in such
Securitized Products be disseminated.
20 There appear to be few retail customer
transactions in the market; only 10 percent of all
Asset-Backed Securities transactions with
customers are for less than $100,000. (For purposes
of assessing the level of retail and institutional
customer participation in TRACE-Eligible
Securities, FINRA considers a trade of less than
$100,000 to be a reasonable proxy for retail
customer participation.)
21 The term Non-Investment Grade is defined in
FINRA Rule 6710(i).
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Federal Register / Vol. 78, No. 228 / Tuesday, November 26, 2013 / Notices
competitive prices for Asset-Backed
Securities. Dissemination of AssetBacked Securities transactions may
assist both buy and sell-side market
participants in price discovery when
pricing and trading such securities. In
addition, in some types of Asset-Backed
Securities, such as Asset-Backed
Securities backed by auto loans,
disseminating the pricing of one AssetBacked Security will aid in pricing a
different Asset-Backed Security where
both securities are substantially similar
and, to some degree, fungible (e.g., both
Asset-Backed Securities are backed by
pools of auto loans having
approximately the same average
duration and the same average coupon
rate, and the borrowers, on average,
posing the same level of credit risk).
Also, FINRA believes that dissemination
of such transactions will assist all
market participants in determining the
quality of their executions and firms in
complying with their regulatory
obligations. Further, transparency in
this sector may improve the quality of
pricing for valuation purposes, which is
critical for both dealers and institutions.
After dissemination begins, FINRA
will observe the trading in Asset-Backed
Securities to monitor the impact of price
transparency in the market for AssetBacked Securities as FINRA previously
has done when initiating dissemination
in any group of TRACE-Eligible
Securities.
Reporting Reduction of Time to Report
Members must report transactions in
corporate bonds, Agency Debt
Securities 22 and MBS TBA transactions
for good delivery (‘‘MBS TBA GD’’) no
later than 15 minutes from the time of
execution, and transaction information
is disseminated immediately upon
receipt of a transaction report.23 This
15-minute timeframe has proven
effective in providing timely and
meaningful transaction data to market
participants.24
In connection with the proposal to
disseminate Asset-Backed Securities
emcdonald on DSK67QTVN1PROD with NOTICES
22 The
term Agency Debt Security is defined in
FINRA Rule 6710(l).
23 FINRA implemented 15-minute reporting for
MBS TBA GD on May 18, 2013.
24 FINRA has adopted longer periods to report
transactions in a limited number of Securitized
Products that are traded infrequently and by a
limited group of market participants. MBS TBA
transactions not for good delivery (‘‘MBS TBA
NGD’’) must be reported no later than 60 minutes
from the time of execution. SBA-Backed ABS traded
in TBA transactions and all Specified Pool
Transactions (involving either Agency PassThrough Mortgage-Backed Securities or SBABacked ABS) must be reported no later than 120
minutes from the time of execution initially, and,
after a pilot program expires on January 24, 2014,
no later than 60 minutes from the time of execution.
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transactions, FINRA proposes to reduce
the period to report such transactions.
Initially, the reporting period will be
reduced from the end of the day on the
trade date during TRACE System Hours
to no later than 45 minutes from the
time of execution as provided in
proposed FINRA Rule
6730(a)(3)(B)(i)b.25 After approximately
six months, the reporting period will be
reduced again from no later than 45
minutes from the time of execution to
no later than 15 minutes from the time
of execution as provided in proposed
FINRA Rule 6730(a)(3)(B)(ii).26
Reducing the time to report AssetBacked Securities transactions will
provide more timely price and other
transaction information to the market.
Reducing the time to report in two
phases will provide members a period
to adjust policies and procedures and
make required technical changes.
FINRA notes that even under the endof-day reporting requirements currently
in place, members report approximately
63% of all Asset-Backed Securities
transactions within 45 minutes of the
time of execution, and approximately
50% of such transactions within 15
minutes of the time of execution.27
List or Fixed Offering Price and
Takedown Transactions
Many Asset-Backed Securities are
underwritten using a syndicated process
that is similar to the offering process for
corporate bonds. In syndicated
offerings, there may be a number of
transactions that occur at the list or
fixed offering price (or the takedown
price). Under the FINRA Rule 6700
Series and FINRA Rule 7730, FINRA
provides more flexible treatment for
TRACE-Eligible Securities transactions
25 See proposed FINRA Rule 6730(a)(3)(B)(i). Like
the reporting requirements currently in effect for
other TRACE-Eligible Securities, FINRA also
proposes exceptions to the 45-minute timeframe for
transactions executed near the end of the business
day or when the TRACE system is not open. See
proposed FINRA Rule 6730(a)(3)(B)(i)a., c., and d.
26 The transitional phase for reducing reporting
timeframes in proposed FINRA Rule 6730(a)(3)(B)(i)
will expire after approximately 180 days. To
accommodate member requests that, if possible,
rule changes requiring technology changes occur on
a Friday, proposed FINRA Rule 6730(a)(3)(B)(i)
provides that the ABS Transitional Phase will
expire on a Friday (i.e., on the 180th day, if a
Friday, or, if the 180th day is not a Friday, on the
Friday next occurring that the TRACE system is
open).
Proposed FINRA Rule 6730(a)(3)(B)(ii)
incorporates by reference Rule 6730(a)(1)(A)
through (D), which require members to report
transactions no later than 15 minutes from the time
of execution, subject to the same exceptions for
transactions executed near the end of the business
day or when the TRACE system is not open.
27 The data is based on Asset-Backed Securities
transactions reported from December 1, 2011
through April 30, 2013.
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Fmt 4703
Sfmt 4703
70605
(except Securitized Products) that are
effected in accordance with the fixed
price and other requirements of a List or
Fixed Offering Price Transaction, as
defined in FINRA Rule 6710(q), or those
of a Takedown Transaction, as defined
in FINRA Rule 6710(r). The advantages
of reporting under the provisions are
three-fold: A member may report a List
or Fixed Offering Price Transaction or a
Takedown Transaction as late as T + 1
during TRACE system hours as
provided in FINRA Rule 6730(a)(2);
such transactions are not disseminated
as provided in FINRA Rule 6750(b)(3);
and a member is not charged a reporting
fee for such transactions as provided in
FINRA Rule 7730(b)(1)(C).
In light of the similarity of the offering
process used to distribute corporate
bonds and many Asset-Backed
Securities, FINRA proposes to amend
FINRA Rule 6710(q) and FINRA Rule
6710(r) to afford members that effect
primary market Asset-Backed Securities
transactions that meet all the
requirements of a List or Fixed Offering
Price Transaction or a Takedown
Transaction the more flexible treatment
set forth in FINRA Rule 6730(a)(2),
FINRA Rule 6750(b)(3), and FINRA Rule
7730(b)(1)(C) for such transactions.28
Dissemination Protocols
FINRA proposes to amend the TRACE
dissemination protocols to disseminate
Asset-Backed Securities transactions
subject to a $10 million dissemination
cap and not to include certain
information in disseminated AssetBacked Securities transaction data.
Dissemination Caps
Currently, there are TRACE
dissemination caps in place, under
which the actual size (volume) of a
transaction over a specified par value is
not displayed in disseminated TRACE
transaction data. A range of
dissemination caps is in effect for
various types of TRACE-Eligible
Securities.29
28 All primary market transactions in other classes
of Securitized Products will continue to be
specifically excluded from the definitions of List or
Fixed Offering Price Transaction and Takedown
Transaction, because, in general, such Securitized
Products are structured, offered and sold quite
differently than corporate bonds (e.g., a large
number of Securitized Products sales are for
forward delivery, and most such securities are not
underwritten using a syndicated process generating
a large number of transactions occurring at the same
price).
29 The dissemination caps applicable to
transactions in various types of TRACE-Eligible
Securities are: (a) $5 million (for Investment Grade
corporate bonds and Agency Debt Securities); (b) $1
million (for Non-Investment Grade corporate
bonds); (c) $25 million (for MBS TBA GD); and (d)
E:\FR\FM\26NON1.SGM
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26NON1
70606
Federal Register / Vol. 78, No. 228 / Tuesday, November 26, 2013 / Notices
FINRA analyzed the distribution of
Asset-Backed Securities transactions,
including Rule 144A transactions in
such securities, to determine an
appropriate dissemination cap, and
proposes setting a $10 million
dissemination cap for such transactions.
For a transaction in an Asset-Backed
Security of less than $10 million
(original par or principal value), the
actual size will be disseminated, and for
a transaction in an Asset-Backed
Security greater than $10 million,
‘‘$10MM+’’ will be disseminated.30
FINRA will monitor the effects of the
$10MM+ dissemination cap on the
Asset-Backed Securities market. The
proposed dissemination cap size of $10
million is comparable to the
dissemination caps for Non-Investment
Grade corporate bonds, measured by the
percentage of transactions and the par
value to be disseminated subject to the
dissemination caps, and more
conservative than the dissemination
caps in place for Investment Grade
corporate bond transactions.31 FINRA
believes that it is important to be
conservative at the onset of
dissemination and will observe the
effects of the $10 million dissemination
cap on the market. FINRA may propose
modifications to the dissemination cap
size in the future if warranted.
emcdonald on DSK67QTVN1PROD with NOTICES
Other Dissemination Protocols
FINRA proposes that the
dissemination protocols currently in use
for most TRACE-Eligible Securities
transactions be modified in two ways
when applied to disseminated AssetBacked Securities transactions. Current
standard data elements that are
disseminated for TRACE-Eligible
Securities include, among other things,
a dealer/customer indicator (indicating
the type of contra party) and a buy/sell
indicator.32 However, the Asset-Backed
$10 million (for MBS TBA NGD, Agency PassThrough Mortgage-Backed Securities traded in
Specified Pool transactions, and SBA-Backed ABS
traded in TBA and Specified Pool transactions). The
term Investment Grade is defined in FINRA Rule
6710(h).
30 Approximately 17.6 percent of trades and
approximately 75.6 percent of original par or
principal value traded in Asset-Backed Securities
transactions (other than Rule 144A transactions)
will be disseminated subject to the $10MM+
dissemination cap. For Rule 144A transactions in
Asset-Backed Securities, approximately 28.5
percent of trades and approximately 88.1 percent of
original par or principal value traded will be
disseminated subject to the $10MM+ dissemination
cap. The information is based on transactions
reported from May 16, 2011 through December
2012.
31 Based on transactions reported from TRACE
inception through December 2012.
32 Additional standard data elements include the
CUSIP, the time and date of the transaction, price,
and the size (subject to dissemination caps).
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18:04 Nov 25, 2013
Jkt 232001
Securities market differs from the
corporate bond market in that it is
smaller and largely institutional. Noting
the smaller number of participants in
the Asset-Backed Securities market,
market participants raised concerns
regarding protecting the confidentiality
of dealer and customer trading
strategies, identities and positions in
certain types of Asset-Backed Securities.
FINRA has considered these factors
and proposes not to disseminate the
dealer/customer and buy/sell indicators
to address such concerns. FINRA
believes that dissemination of AssetBacked Securities transactions without
these items will protect sensitive
information regarding the trading
strategies, identities and positions of
investors and will not expose dealers to
additional risk in providing liquidity,
while providing market participants
sufficient information about AssetBacked Securities transactions.
Additional Data Availability Under
FINRA Rule 7730
FINRA compiles disseminated realtime data for transactions, which is
organized in three data sets: The
Corporate Bond Data Set, the Agency
Data Set and the ABS Data Set as
provided in FINRA Rule 7730. In
addition, in the Rule 144A
Dissemination Amendments, FINRA
established a Rule 144A Data Set.33
Historic TRACE Data is similarly
organized.34
Currently, Asset-Backed Securities
data—organized as the ABS Data Set,
and for Historic TRACE Data, as the
Historic ABS Data Set—includes all
Securitized Products transactions that
are disseminated (i.e., all TBA
transactions and all Specified Pool
Transactions).
FINRA proposes to include the
transaction information from
disseminated Asset-Backed Securities
transactions in the ABS Data Set (to be
renamed the ‘‘SP Data Set’’) and the
Historic ABS Data Set (to be renamed
the ‘‘Historic SP Data Set’’).35 AssetSpecified Pool Transactions are disseminated
subject to modified dissemination protocols. See
Securities Exchange Act Release No. 68084 (October
23, 2012), 77 FR 65436 (October 26, 2012) (SEC
Approval Order of File No. SR–FINRA–2012–042)
and Regulatory Notice 12–56 (December 2012).
33 See supra note 6, Rule 144A Dissemination
Amendments.
34 FINRA also established a Historic Rule 144A
Data Set as part of the Rule 144A Dissemination
Amendments. See supra note 6, Rule 144A
Dissemination Amendments.
35 The ABS Data Set and the Historic ABS Data
Set will be re-named, respectively, the SP Data Set
and the Historic SP Data Set, as part of the
amendments to the Rule 6700 Series and Rule 7730
in connection with re-naming as Securitized
Products the broad group of securities currently
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Frm 00079
Fmt 4703
Sfmt 4703
Backed Securities that are traded in
Rule 144A transactions will be included
in, respectively, the Rule 144A Data Set,
when available, and the Historic Rule
144A Data Set, when available.
FINRA does not propose to amend the
fees currently in effect for the SP Data
Set and the Historic SP Data Set.
Similarly, when the Rule 144A Data Set
and the Historic Rule 144A Data Set
become available, disseminated
information regarding Rule 144A
transactions in Asset-Backed Securities
will be included in such data sets
without any change to the applicable
fees.36
Other Amendments
The reporting requirements for
Securitized Products that are MBS TBA
GD and MBS TBA NGD are set forth in
FINRA Rule 6730(a)(3)(D) and FINRA
Rule 6730(a)(3)(E), respectively, and
include references to two pilot programs
that have expired. Reporting
requirements for certain other
Securitized Products in FINRA Rule
6730(a)(3) cross-reference these
reporting provisions. FINRA proposes to
eliminate the provisions that have
expired and all cross-references thereto
in FINRA Rule 6730(a) and make
conforming changes.37
Finally, FINRA proposes conforming
and technical amendments to the
FINRA Rule 6700 Series and FINRA
Rule 7730 to reflect the proposed
definitions, Securitized Product and
Asset-Backed Security, and generally
the use of the term Securitized Product
in lieu of Asset-Backed Security; to
make similar changes in FINRA Rule
7730 to delete the terms ABS Data Set
and Historic ABS Data Set and
substitute the terms SP Data Set and
Historic SP Data Set; and, to make other
technical and conforming amendments
consistent with the amendments
described herein to the FINRA Rule
6700 Series.
FINRA will announce the effective
date of the proposed rule change in a
Regulatory Notice to be published no
later than 60 days following
Commission approval. The effective
date will be no later than 270 days
following publication of the Regulatory
Notice announcing Commission
approval.
referred to as Asset-Backed Securities and
redefining the term Asset-Backed Securities more
narrowly, as discussed, infra. A transaction in a
disseminated TRACE-Eligible Security becomes
available as part of Historic TRACE Data no earlier
than 18 months after the specific transaction is
reported to TRACE.
36 See supra note 6, Rule 144A Dissemination
Amendments.
37 See proposed amendments to FINRA Rule
6730(a)(3)(D) through (G).
E:\FR\FM\26NON1.SGM
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Federal Register / Vol. 78, No. 228 / Tuesday, November 26, 2013 / Notices
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,38 which
requires, among other things, that
FINRA rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest. FINRA believes that the
proposed rule change will increase
transparency in the Asset-Backed
Securities market, which may enhance
the ability of investors to engage in
meaningful price discovery to identify
and negotiate fair and competitive
prices for Asset-Backed Securities. In
addition, the proposed dissemination of
Asset-Backed Securities transaction data
will allow investors to compare their
executions with executions in the same
and similar securities in the market and
may facilitate their assessment of the
quality of the executions provided to
them. Similarly, additional transparency
in such securities transactions may
assist broker-dealers in complying with
their regulatory obligations regarding
best execution. Finally, for brokerdealers and institutional investors that
hold positions in such Asset-Backed
Securities, the proposed increased
transparency may enable them to
improve the accuracy of their valuation
of such positions. These enhancements
in pricing, increased capabilities to
compare execution quality in
transactions, and more accurate
valuation of positions that may result
from the additional market transparency
are designed to deter or prevent
fraudulent and manipulative acts and
practices, promote just and equitable
principles of trade, and, in general,
protect investors and the public interest.
emcdonald on DSK67QTVN1PROD with NOTICES
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Based on the
characteristics of the market, FINRA
believes that additional price
transparency in the Asset-Backed
Securities market may enhance the
ability of investors to identify and
negotiate fair and competitive prices for
these securities. In addition,
dissemination may assist institutional
and retail customers in determining the
quality of executions provided to them,
which should incentivize broker-dealers
38 15
U.S.C. 78o–3(b)(6).
VerDate Mar<15>2010
18:04 Nov 25, 2013
Jkt 232001
to provide competitive executions in
such securities.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) by order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FINRA–2013–046 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–FINRA–2013–046. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
70607
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of FINRA. All comments received
will be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FINRA–
2013–046 and should be submitted on
or before December 17, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.39
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–28273 Filed 11–25–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70907; File No. SR–CBOE–
2013–111]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Amend the CBSX Fees
Schedule
November 20, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that, on
November 14, 2013, Chicago Board
Options Exchange, Incorporated (the
‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Fees Schedule of its CBOE Stock
39 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\26NON1.SGM
26NON1
]]>Agencies
[Federal Register Volume 78, Number 228 (Tuesday, November 26, 2013)]
[Notices]
[Pages 70602-70607]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28273]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70906; File No. SR-FINRA-2013-046]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to
TRACE Reporting and Dissemination of Transactions in Additional Asset-
Backed Securities
November 20, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 70603]]
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 13, 2013, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by FINRA. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend the FINRA Rule 6700 Series and the
Trade Reporting and Compliance Engine (``TRACE'') dissemination
protocols to disseminate additional Asset-Backed Securities
transactions and, concomitantly, to reduce the reporting periods for
such securities. FINRA also proposes to re-name as ``Securitized
Products'' the broad group of securities currently defined as ``Asset-
Backed Securities,'' to re-define the term ``Asset-Backed Security''
more narrowly to mean the specific securities that FINRA proposes to
disseminate in the proposed rule change, to make other definitional
changes and to incorporate technical and conforming amendments to the
FINRA Rule 6700 Series and FINRA Rule 7730 in connection with
provisions that have expired and the amendments referenced above.
The text of the proposed rule change is available on FINRA's Web
site at https://www.finra.org, at the principal office of FINRA and at
the Commission's Public Reference Room.\3\
---------------------------------------------------------------------------
\3\ As part of the proposed rule change, FINRA submitted an
Exhibit 4 and an Exhibit 5. The Exhibit 4 shows the text of the
proposed rule change marked to show the proposed changes as compared
to the FINRA Rule 6700 Series and FINRA Rule 7730 including
amendments approved by the SEC as if such amendments were effective.
See note 6. The Exhibit 5 shows the text of the proposed rule change
marked to show the proposed changes as compared to the current rule
text of the rules in accordance with the requirements of Form 19b-4.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
FINRA proposes to amend the FINRA Rule 6700 Series and the TRACE
dissemination protocols to provide for the dissemination of
transactions in an additional group of Asset-Backed Securities.
Transactions in such Asset-Backed Securities effected pursuant to Rule
144A \4\ under the Securities Act of 1933 \5\ (``Rule 144A
transactions'') will also be disseminated.\6\ Concomitantly, FINRA
proposes to reduce the reporting period for such Asset-Backed
Securities and incorporate two changes to the TRACE dissemination
protocols. FINRA also proposes to re-name as Securitized Products the
broad group of securities currently defined as Asset-Backed Securities
in FINRA Rule 6710(m) and, in a proposed new definition in FINRA Rule
6710(cc), to re-define the term Asset-Backed Security more narrowly to
mean the specific securities that FINRA proposes to disseminate in the
proposed rule change (e.g., asset-backed securities collateralized by
pools of credit card receivables, student loans, auto loans, etc.).\7\
Also, in FINRA Rule 6710, FINRA proposes to add three new definitions
and amend the defined terms ``List or Fixed Offering Price
Transaction'' and ``Takedown Transaction'' to apply to certain primary
market transactions in Asset-Backed Securities.\8\ Finally, in the
FINRA Rule 6700 Series and FINRA Rule 7730, FINRA proposes to delete
reporting provisions that have expired and incorporate additional
technical and conforming amendments consistent with the above-
referenced proposed amendments to the FINRA Rule 6700 Series.
---------------------------------------------------------------------------
\4\ 17 CFR 230.144A.
\5\ 15 U.S.C. 77a et seq. (hereinafter ``Securities Act'').
\6\ The SEC recently approved FINRA's proposed rule change to
disseminate transactions in TRACE-Eligible Securities effected as
Rule 144A transactions (provided that securities of the same type
are subject to dissemination if effected in non-Rule 144A
transactions). See Securities Exchange Act Release No. 70345
(September 6, 2013), 78 FR 56251 (September 12, 2013) (Order
Granting Approval of Proposed Rule Change Relating to the
Dissemination of Transactions in TRACE-Eligible Securities that are
Effected Pursuant to Securities Act Rule 144A); Securities Exchange
Act Release No. 70691 (October 16, 2013), 78 FR 62788 (October 22,
2013) (Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change Relating to TRACE Fees for Securities Act Rule 144A
Transaction Data) (together, ``Rule 144A Dissemination
Amendments''); and Regulatory Notice 13-35 (announcing June 30, 2014
as the effective date for SR-FINRA-2013-029 and SR-FINRA-2013-043).
As a result, when the proposed rule change to disseminate the
designated group of Asset-Backed Securities is approved and becomes
effective, both Rule 144A and non-Rule 144A transactions in such
Asset-Backed Securities will be disseminated.
\7\ Except when the context requires otherwise, hereinafter,
FINRA uses the terms Securitized Product and Asset-Backed Security
as if adopted (i.e., Asset-Backed Security means a narrow class of
Securitized Product as defined in proposed FINRA Rule 6710(cc) and
Securitized Product means the broader group of products and
instruments, including Asset-Backed Securities).
\8\ The terms List or Fixed Offering Price and Takedown
Transaction are defined in, respectively, FINRA Rule 6710(q) and
FINRA Rule 6710(r).
---------------------------------------------------------------------------
Definitions
Asset-Backed Security--Proposed FINRA Rule 6710(cc)
FINRA proposes to re-define Asset-Backed Security more narrowly to
describe a specific class of Securitized Products that is the subject
of the proposed rule change. FINRA believes that the proposed narrower
definition of Asset-Backed Security is consistent with industry usage.
In addition, to clarify the scope of the term, FINRA proposes to
specifically exclude three types of instruments from the term Asset-
Backed Security: (i) Agency Pass-Through Mortgage-Backed Securities
traded to be announced (``TBA'') \9\ or in Specified Pool Transactions;
\10\ (ii) SBA-Backed ABS \11\ traded TBA or in Specified Pool
Transactions; and (iii) Collateralized Mortgage Obligations
(``CMOs'').\12\ As re-defined in proposed FINRA Rule 6710(cc), the term
``Asset-Backed Security'' means:
---------------------------------------------------------------------------
\9\ The terms Agency Pass-Through Mortgage-Backed Security and
To Be Announced (``TBA'') are defined, respectively, in FINRA Rule
6710(v) and FINRA Rule 6710(u).
\10\ The term Specified Pool Transaction is defined in FINRA
Rule 6710(x).
\11\ The term SBA-Backed ABS is defined in FINRA Rule 6710(bb).
\12\ FINRA proposes to define the term Collateralized Mortgage
Obligation in proposed FINRA Rule 6710(dd). See note 17.
A type of Securitized Product where the Asset-Backed Security is
collateralized by any type of financial asset, such as a consumer or
student loan, a lease, or a secured or unsecured receivable, but
excludes: (i) An Agency Pass-Through Mortgage-Backed Security as
defined in paragraph (v) traded To Be Announced (``TBA'') as defined
in paragraph (u) or in a Specified Pool Transaction as defined in
paragraph (x); (ii) an SBA-Backed ABS as defined in paragraph (bb)
traded TBA or in a Specified Pool Transaction; and (iii) a
---------------------------------------------------------------------------
Collateralized Mortgage Obligation as defined in paragraph (dd).
In addition, in proposed Supplementary Material .01 to FINRA Rule
6710, FINRA provides additional
[[Page 70604]]
guidance regarding the scope of the defined term Asset-Backed
Security.\13\
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\13\ Proposed Supplementary Material .01 to FINRA Rule 6710
provides that Asset-Backed Security shall include, but is not
limited to:
Securities collateralized by the following types of assets and
securities: Credit card receivables; automobile loans and leases;
student loans; home equity loans and home equity lines of credit;
aircraft leases; automobile floorplan and wholesale loans;
motorcycle loans and leases; recreational vehicle loans;
manufactured housing loans; commercial loans; tranches of other
Asset-Backed Securities; reinsurance; timeshare obligations; loans
or other financial instruments generating a stream of payments and
guaranteed as to principal or interest (or both) by the Small
Business Administration (traded other than to be announced (``TBA'')
as defined in paragraph (u) or in a Specified Pool Transaction as
defined in paragraph (x)); collateralized debt obligations;
collateralized bond obligations; collateralized loan obligations;
and Non-Agency Backed Commercial Mortgage-Backed Securities as
defined in paragraph (ff).
---------------------------------------------------------------------------
Securitized Product--Amended FINRA Rule 6710(m)
FINRA proposes to amend FINRA Rule 6710(m) to re-name as
Securitized Products the broader group of securities currently defined
as Asset-Backed Securities. The term Securitized Product is used widely
to describe the broad group of securities, including various types of
mortgage-backed securities that FINRA currently refers to in FINRA Rule
6710(m). FINRA's proposal to adopt the term Securitized Product to
apply to this wide range of structured and securitized instruments is
consistent with industry usage.
Proposed amended FINRA Rule 6710(m) also includes a technical
amendment to change a reference to Section 3(a)(77)(A) of the Act \14\
to Section 3(a)(79)(A) of the Act.\15\ Section 3(a)(77) of the Act was
renumbered in Section 101(b)(1) of the Jumpstart Our Business Startups
Act (the ``JOBS Act'').\16\ Proposed amended FINRA Rule 6710(m)
provides:
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\14\ 15 U.S.C. 78c(a)(77)(A).
\15\ 15 U.S.C. 78c(a)(79)(A).
\16\ 15 U.S.C. 78c(a)(77). The JOBS Act was enacted on April 5,
2012; Public Law 112-106, 126 Stat. 306 (2012).
``Securitized Product'' means a security collateralized by any
type of financial asset, such as a loan, a lease, a mortgage, or a
secured or unsecured receivable, and includes but is not limited to
an asset-backed security as defined in Section 3(a)(79)(A) of the
Exchange Act, a synthetic asset-backed security, and any residual
tranche or interest of any security specified above, which tranche
or interest is a debt security for purposes of paragraph (a) and the
Rule 6700 Series.
Other Definitions
FINRA proposes to define Collateralized Mortgage Obligation,
Agency-Backed Commercial Mortgage-Backed Security and Non-Agency-Backed
Commercial Mortgage-Backed Security in, respectively, proposed FINRA
Rule 6710(dd), proposed FINRA Rule 6710(ee) and proposed FINRA Rule
6710(ff) to provide additional clarity regarding various classes of
securities that are included in, or excluded from, the terms
Securitized Product and Asset-Backed Security and the various
dissemination and reporting requirements applicable to these different
types of Securitized Products.\17\
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\17\ In proposed FINRA Rule 6710(dd), Collateralized Mortgage
Obligation is defined as:
A type of Securitized Product structured in multiple classes (or
tranches) backed by Agency Pass-Through Mortgage-Backed Securities
as defined in paragraph (v), mortgage loans, certificates backed by
project loans or construction loans, other types of mortgage-backed
securities or assets derivative of mortgage-backed securities, and
includes a real estate mortgage investment conduit (``REMIC'') and
an Agency-Backed Commercial Mortgage-Backed Security as defined in
paragraph (ee).
In proposed FINRA Rule 6710(ee), Agency-Backed Commercial
Mortgage-Backed Security is defined as:
A type of Securitized Product that is classified as a
Collateralized Mortgage Obligation for purposes of the Rule 6700
Series and Rule 7730 and is issued in conformity with a program of
an Agency as defined in paragraph (k) or a Government-Sponsored
Enterprise (``GSE'') as defined in paragraph (n), for which the
timely payment of principal and interest is guaranteed by the Agency
or GSE, representing ownership interest in a pool (or pools) of
mortgage loans on commercial property.
In proposed FINRA Rule 6710(ff), Non-Agency-BackedCommercial
Mortgage-Backed Security is defined as:
A type of Securitized Product that is classified as an Asset-
Backed Security for purposes of the Rule 6700 Series and Rule 7730
and is issued by an entity other than an Agency as defined in
paragraph (k) or a Government-Sponsored Enterprise (``GSE'') as
defined in paragraph (n), representing ownership interest in a pool
(or pools) of mortgage loans on commercial property.
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Dissemination
Currently, FINRA requires that virtually all transactions in U.S.
dollar-denominated debt securities, except U.S. Treasury securities,
foreign sovereign securities and municipal securities, be reported to
TRACE, and most transactions reported are subject to dissemination
immediately upon receipt of a transaction report.
Securitized Products were the last major group of securities to be
added to TRACE. After studying the liquidity and trading
characteristics of various classes of Securitized Products, FINRA began
to disseminate Securitized Products in phases, beginning with the
dissemination of two very significant segments: TBA transactions and
Specified Pool transactions in Agency Pass-Through Mortgage-Backed
Securities and SBA-Backed ABS.\18\
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\18\ On November 12, 2012, FINRA began disseminating
transactions in Agency Pass-Though Mortgage-Backed Securities traded
TBA (``MBS TBA transactions''), which are the most liquid
Securitized Products. See Securities Exchange Act Release No. 66829
(April 18, 2012), 77 FR 24748 (April 25, 2012) (SEC Approval Order,
File No. SR-FINRA-2012-020). See also Regulatory Notice 12-26 (May
2012) and Regulatory Notice 12-48 (November 2012).
On July 22, 2013, FINRA began disseminating Agency Pass-Through
Mortgage-Backed Securities and SBA-Backed ABS traded in Specified
Pool Transactions, which are correlated in pricing to MBS TBA
transactions and TBA transactions in SBA-Backed ABS. See Securities
Exchange Act Release No. 68084 (October 23, 2012), 77 FR 65436
(October 26, 2012) (SEC Approval Order of File No. SR-FINRA-2012-
042) and Regulatory Notice 12-56 (December 2012).
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FINRA proposes that transactions in Asset-Backed Securities be
disseminated, including Rule 144A transactions in such securities, to
increase transparency in the bond market, and particularly in the
market for Asset-Backed Securities.\19\ FINRA has reviewed substantial
amounts of transaction data for Asset-Backed Securities since reporting
began on May 16, 2011. The Asset-Backed Securities market is considered
a largely institutional market.\20\ In 2012, the average daily par
value traded in Asset-Backed Securities was $5.8 billion, which was
approximately the same size of the market in publicly traded Non-
Investment Grade corporate bonds.\21\ Consistent with the institutional
nature of Asset-Backed Securities transactions, although the size of
the Asset-Backed Securities market is comparable to the market for
publicly-traded Non-Investment Grade corporate bonds, there are
substantially fewer trades in Asset-Backed Securities.
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\19\ See supra note 6, Rule 144A Dissemination Amendments.
The proposed rule change to disseminate Asset-Backed Securities
would be the third group of Securitized Products to be disseminated.
FINRA continues to review the fourth subclass of Securitized
Products--CMOs and Agency-Backed Commercial Mortgage-Backed
Securities--and, at a later date, may propose that transactions in
such Securitized Products be disseminated.
\20\ There appear to be few retail customer transactions in the
market; only 10 percent of all Asset-Backed Securities transactions
with customers are for less than $100,000. (For purposes of
assessing the level of retail and institutional customer
participation in TRACE-Eligible Securities, FINRA considers a trade
of less than $100,000 to be a reasonable proxy for retail customer
participation.)
\21\ The term Non-Investment Grade is defined in FINRA Rule
6710(i).
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Based on the characteristics of the market, FINRA believes that the
proposed additional price transparency in the Asset-Backed Securities
market will enhance the ability of investors to identify and negotiate
fair and
[[Page 70605]]
competitive prices for Asset-Backed Securities. Dissemination of Asset-
Backed Securities transactions may assist both buy and sell-side market
participants in price discovery when pricing and trading such
securities. In addition, in some types of Asset-Backed Securities, such
as Asset-Backed Securities backed by auto loans, disseminating the
pricing of one Asset-Backed Security will aid in pricing a different
Asset-Backed Security where both securities are substantially similar
and, to some degree, fungible (e.g., both Asset-Backed Securities are
backed by pools of auto loans having approximately the same average
duration and the same average coupon rate, and the borrowers, on
average, posing the same level of credit risk). Also, FINRA believes
that dissemination of such transactions will assist all market
participants in determining the quality of their executions and firms
in complying with their regulatory obligations. Further, transparency
in this sector may improve the quality of pricing for valuation
purposes, which is critical for both dealers and institutions.
After dissemination begins, FINRA will observe the trading in
Asset-Backed Securities to monitor the impact of price transparency in
the market for Asset-Backed Securities as FINRA previously has done
when initiating dissemination in any group of TRACE-Eligible
Securities.
Reporting Reduction of Time to Report
Members must report transactions in corporate bonds, Agency Debt
Securities \22\ and MBS TBA transactions for good delivery (``MBS TBA
GD'') no later than 15 minutes from the time of execution, and
transaction information is disseminated immediately upon receipt of a
transaction report.\23\ This 15-minute timeframe has proven effective
in providing timely and meaningful transaction data to market
participants.\24\
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\22\ The term Agency Debt Security is defined in FINRA Rule
6710(l).
\23\ FINRA implemented 15-minute reporting for MBS TBA GD on May
18, 2013.
\24\ FINRA has adopted longer periods to report transactions in
a limited number of Securitized Products that are traded
infrequently and by a limited group of market participants. MBS TBA
transactions not for good delivery (``MBS TBA NGD'') must be
reported no later than 60 minutes from the time of execution. SBA-
Backed ABS traded in TBA transactions and all Specified Pool
Transactions (involving either Agency Pass-Through Mortgage-Backed
Securities or SBA-Backed ABS) must be reported no later than 120
minutes from the time of execution initially, and, after a pilot
program expires on January 24, 2014, no later than 60 minutes from
the time of execution.
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In connection with the proposal to disseminate Asset-Backed
Securities transactions, FINRA proposes to reduce the period to report
such transactions. Initially, the reporting period will be reduced from
the end of the day on the trade date during TRACE System Hours to no
later than 45 minutes from the time of execution as provided in
proposed FINRA Rule 6730(a)(3)(B)(i)b.\25\ After approximately six
months, the reporting period will be reduced again from no later than
45 minutes from the time of execution to no later than 15 minutes from
the time of execution as provided in proposed FINRA Rule
6730(a)(3)(B)(ii).\26\
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\25\ See proposed FINRA Rule 6730(a)(3)(B)(i). Like the
reporting requirements currently in effect for other TRACE-Eligible
Securities, FINRA also proposes exceptions to the 45-minute
timeframe for transactions executed near the end of the business day
or when the TRACE system is not open. See proposed FINRA Rule
6730(a)(3)(B)(i)a., c., and d.
\26\ The transitional phase for reducing reporting timeframes in
proposed FINRA Rule 6730(a)(3)(B)(i) will expire after approximately
180 days. To accommodate member requests that, if possible, rule
changes requiring technology changes occur on a Friday, proposed
FINRA Rule 6730(a)(3)(B)(i) provides that the ABS Transitional Phase
will expire on a Friday (i.e., on the 180th day, if a Friday, or, if
the 180th day is not a Friday, on the Friday next occurring that the
TRACE system is open).
Proposed FINRA Rule 6730(a)(3)(B)(ii) incorporates by reference
Rule 6730(a)(1)(A) through (D), which require members to report
transactions no later than 15 minutes from the time of execution,
subject to the same exceptions for transactions executed near the
end of the business day or when the TRACE system is not open.
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Reducing the time to report Asset-Backed Securities transactions
will provide more timely price and other transaction information to the
market. Reducing the time to report in two phases will provide members
a period to adjust policies and procedures and make required technical
changes. FINRA notes that even under the end-of-day reporting
requirements currently in place, members report approximately 63% of
all Asset-Backed Securities transactions within 45 minutes of the time
of execution, and approximately 50% of such transactions within 15
minutes of the time of execution.\27\
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\27\ The data is based on Asset-Backed Securities transactions
reported from December 1, 2011 through April 30, 2013.
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List or Fixed Offering Price and Takedown Transactions
Many Asset-Backed Securities are underwritten using a syndicated
process that is similar to the offering process for corporate bonds. In
syndicated offerings, there may be a number of transactions that occur
at the list or fixed offering price (or the takedown price). Under the
FINRA Rule 6700 Series and FINRA Rule 7730, FINRA provides more
flexible treatment for TRACE-Eligible Securities transactions (except
Securitized Products) that are effected in accordance with the fixed
price and other requirements of a List or Fixed Offering Price
Transaction, as defined in FINRA Rule 6710(q), or those of a Takedown
Transaction, as defined in FINRA Rule 6710(r). The advantages of
reporting under the provisions are three-fold: A member may report a
List or Fixed Offering Price Transaction or a Takedown Transaction as
late as T + 1 during TRACE system hours as provided in FINRA Rule
6730(a)(2); such transactions are not disseminated as provided in FINRA
Rule 6750(b)(3); and a member is not charged a reporting fee for such
transactions as provided in FINRA Rule 7730(b)(1)(C).
In light of the similarity of the offering process used to
distribute corporate bonds and many Asset-Backed Securities, FINRA
proposes to amend FINRA Rule 6710(q) and FINRA Rule 6710(r) to afford
members that effect primary market Asset-Backed Securities transactions
that meet all the requirements of a List or Fixed Offering Price
Transaction or a Takedown Transaction the more flexible treatment set
forth in FINRA Rule 6730(a)(2), FINRA Rule 6750(b)(3), and FINRA Rule
7730(b)(1)(C) for such transactions.\28\
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\28\ All primary market transactions in other classes of
Securitized Products will continue to be specifically excluded from
the definitions of List or Fixed Offering Price Transaction and
Takedown Transaction, because, in general, such Securitized Products
are structured, offered and sold quite differently than corporate
bonds (e.g., a large number of Securitized Products sales are for
forward delivery, and most such securities are not underwritten
using a syndicated process generating a large number of transactions
occurring at the same price).
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Dissemination Protocols
FINRA proposes to amend the TRACE dissemination protocols to
disseminate Asset-Backed Securities transactions subject to a $10
million dissemination cap and not to include certain information in
disseminated Asset-Backed Securities transaction data.
Dissemination Caps
Currently, there are TRACE dissemination caps in place, under which
the actual size (volume) of a transaction over a specified par value is
not displayed in disseminated TRACE transaction data. A range of
dissemination caps is in effect for various types of TRACE-Eligible
Securities.\29\
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\29\ The dissemination caps applicable to transactions in
various types of TRACE-Eligible Securities are: (a) $5 million (for
Investment Grade corporate bonds and Agency Debt Securities); (b) $1
million (for Non-Investment Grade corporate bonds); (c) $25 million
(for MBS TBA GD); and (d) $10 million (for MBS TBA NGD, Agency Pass-
Through Mortgage-Backed Securities traded in Specified Pool
transactions, and SBA-Backed ABS traded in TBA and Specified Pool
transactions). The term Investment Grade is defined in FINRA Rule
6710(h).
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[[Page 70606]]
FINRA analyzed the distribution of Asset-Backed Securities
transactions, including Rule 144A transactions in such securities, to
determine an appropriate dissemination cap, and proposes setting a $10
million dissemination cap for such transactions. For a transaction in
an Asset-Backed Security of less than $10 million (original par or
principal value), the actual size will be disseminated, and for a
transaction in an Asset-Backed Security greater than $10 million,
``$10MM+'' will be disseminated.\30\ FINRA will monitor the effects of
the $10MM+ dissemination cap on the Asset-Backed Securities market. The
proposed dissemination cap size of $10 million is comparable to the
dissemination caps for Non-Investment Grade corporate bonds, measured
by the percentage of transactions and the par value to be disseminated
subject to the dissemination caps, and more conservative than the
dissemination caps in place for Investment Grade corporate bond
transactions.\31\ FINRA believes that it is important to be
conservative at the onset of dissemination and will observe the effects
of the $10 million dissemination cap on the market. FINRA may propose
modifications to the dissemination cap size in the future if warranted.
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\30\ Approximately 17.6 percent of trades and approximately 75.6
percent of original par or principal value traded in Asset-Backed
Securities transactions (other than Rule 144A transactions) will be
disseminated subject to the $10MM+ dissemination cap. For Rule 144A
transactions in Asset-Backed Securities, approximately 28.5 percent
of trades and approximately 88.1 percent of original par or
principal value traded will be disseminated subject to the $10MM+
dissemination cap. The information is based on transactions reported
from May 16, 2011 through December 2012.
\31\ Based on transactions reported from TRACE inception through
December 2012.
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Other Dissemination Protocols
FINRA proposes that the dissemination protocols currently in use
for most TRACE-Eligible Securities transactions be modified in two ways
when applied to disseminated Asset-Backed Securities transactions.
Current standard data elements that are disseminated for TRACE-Eligible
Securities include, among other things, a dealer/customer indicator
(indicating the type of contra party) and a buy/sell indicator.\32\
However, the Asset-Backed Securities market differs from the corporate
bond market in that it is smaller and largely institutional. Noting the
smaller number of participants in the Asset-Backed Securities market,
market participants raised concerns regarding protecting the
confidentiality of dealer and customer trading strategies, identities
and positions in certain types of Asset-Backed Securities.
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\32\ Additional standard data elements include the CUSIP, the
time and date of the transaction, price, and the size (subject to
dissemination caps).
Specified Pool Transactions are disseminated subject to
modified dissemination protocols. See Securities Exchange Act
Release No. 68084 (October 23, 2012), 77 FR 65436 (October 26, 2012)
(SEC Approval Order of File No. SR-FINRA-2012-042) and Regulatory
Notice 12-56 (December 2012).
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FINRA has considered these factors and proposes not to disseminate
the dealer/customer and buy/sell indicators to address such concerns.
FINRA believes that dissemination of Asset-Backed Securities
transactions without these items will protect sensitive information
regarding the trading strategies, identities and positions of investors
and will not expose dealers to additional risk in providing liquidity,
while providing market participants sufficient information about Asset-
Backed Securities transactions.
Additional Data Availability Under FINRA Rule 7730
FINRA compiles disseminated real-time data for transactions, which
is organized in three data sets: The Corporate Bond Data Set, the
Agency Data Set and the ABS Data Set as provided in FINRA Rule 7730. In
addition, in the Rule 144A Dissemination Amendments, FINRA established
a Rule 144A Data Set.\33\ Historic TRACE Data is similarly
organized.\34\
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\33\ See supra note 6, Rule 144A Dissemination Amendments.
\34\ FINRA also established a Historic Rule 144A Data Set as
part of the Rule 144A Dissemination Amendments. See supra note 6,
Rule 144A Dissemination Amendments.
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Currently, Asset-Backed Securities data--organized as the ABS Data
Set, and for Historic TRACE Data, as the Historic ABS Data Set--
includes all Securitized Products transactions that are disseminated
(i.e., all TBA transactions and all Specified Pool Transactions).
FINRA proposes to include the transaction information from
disseminated Asset-Backed Securities transactions in the ABS Data Set
(to be renamed the ``SP Data Set'') and the Historic ABS Data Set (to
be renamed the ``Historic SP Data Set'').\35\ Asset-Backed Securities
that are traded in Rule 144A transactions will be included in,
respectively, the Rule 144A Data Set, when available, and the Historic
Rule 144A Data Set, when available.
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\35\ The ABS Data Set and the Historic ABS Data Set will be re-
named, respectively, the SP Data Set and the Historic SP Data Set,
as part of the amendments to the Rule 6700 Series and Rule 7730 in
connection with re-naming as Securitized Products the broad group of
securities currently referred to as Asset-Backed Securities and
redefining the term Asset-Backed Securities more narrowly, as
discussed, infra. A transaction in a disseminated TRACE-Eligible
Security becomes available as part of Historic TRACE Data no earlier
than 18 months after the specific transaction is reported to TRACE.
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FINRA does not propose to amend the fees currently in effect for
the SP Data Set and the Historic SP Data Set. Similarly, when the Rule
144A Data Set and the Historic Rule 144A Data Set become available,
disseminated information regarding Rule 144A transactions in Asset-
Backed Securities will be included in such data sets without any change
to the applicable fees.\36\
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\36\ See supra note 6, Rule 144A Dissemination Amendments.
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Other Amendments
The reporting requirements for Securitized Products that are MBS
TBA GD and MBS TBA NGD are set forth in FINRA Rule 6730(a)(3)(D) and
FINRA Rule 6730(a)(3)(E), respectively, and include references to two
pilot programs that have expired. Reporting requirements for certain
other Securitized Products in FINRA Rule 6730(a)(3) cross-reference
these reporting provisions. FINRA proposes to eliminate the provisions
that have expired and all cross-references thereto in FINRA Rule
6730(a) and make conforming changes.\37\
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\37\ See proposed amendments to FINRA Rule 6730(a)(3)(D) through
(G).
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Finally, FINRA proposes conforming and technical amendments to the
FINRA Rule 6700 Series and FINRA Rule 7730 to reflect the proposed
definitions, Securitized Product and Asset-Backed Security, and
generally the use of the term Securitized Product in lieu of Asset-
Backed Security; to make similar changes in FINRA Rule 7730 to delete
the terms ABS Data Set and Historic ABS Data Set and substitute the
terms SP Data Set and Historic SP Data Set; and, to make other
technical and conforming amendments consistent with the amendments
described herein to the FINRA Rule 6700 Series.
FINRA will announce the effective date of the proposed rule change
in a Regulatory Notice to be published no later than 60 days following
Commission approval. The effective date will be no later than 270 days
following publication of the Regulatory Notice announcing Commission
approval.
[[Page 70607]]
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\38\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change will
increase transparency in the Asset-Backed Securities market, which may
enhance the ability of investors to engage in meaningful price
discovery to identify and negotiate fair and competitive prices for
Asset-Backed Securities. In addition, the proposed dissemination of
Asset-Backed Securities transaction data will allow investors to
compare their executions with executions in the same and similar
securities in the market and may facilitate their assessment of the
quality of the executions provided to them. Similarly, additional
transparency in such securities transactions may assist broker-dealers
in complying with their regulatory obligations regarding best
execution. Finally, for broker-dealers and institutional investors that
hold positions in such Asset-Backed Securities, the proposed increased
transparency may enable them to improve the accuracy of their valuation
of such positions. These enhancements in pricing, increased
capabilities to compare execution quality in transactions, and more
accurate valuation of positions that may result from the additional
market transparency are designed to deter or prevent fraudulent and
manipulative acts and practices, promote just and equitable principles
of trade, and, in general, protect investors and the public interest.
---------------------------------------------------------------------------
\38\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. Based on the characteristics of
the market, FINRA believes that additional price transparency in the
Asset-Backed Securities market may enhance the ability of investors to
identify and negotiate fair and competitive prices for these
securities. In addition, dissemination may assist institutional and
retail customers in determining the quality of executions provided to
them, which should incentivize broker-dealers to provide competitive
executions in such securities.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-FINRA-2013-046 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2013-046. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of FINRA. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-FINRA-2013-046 and should be
submitted on or before December 17, 2013.
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\39\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-28273 Filed 11-25-13; 8:45 am]
BILLING CODE 8011-01-P
